Pressure Builds in Russia-Ukraine Pipeline Row

Russia raised the stakes Friday over its efforts to take control of Ukraine’s gas-pipeline system, as it started diverting gas supplies to Europe away from the former Soviet republic. But Moscow has yet to play its most powerful card that could put an end to the saga about gas transit through Ukraine.

Ukraine said earlier Friday that Russia had almost halved gas-transit volumes through its pipeline system to Europe in recent days.

“This is only the beginning,” a Gazprom spokesman said not long after, adding that lowering volumes was part of a move to redirect gas from Ukraine to the Nord Stream pipeline and through Belarus.

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Russia — a major supplier of natural gas to Europe — relies strongly on Ukraine, through which Russian gas travels west to Europe. The two neighbors remain locked in talks over a new gas-supply contract; Kiev is pushing for cheaper gas in order to balance its budget, but in exchange for lower-priced gas, Moscow is aiming to gain control of Ukraine’s pipeline system.

In a sign that tensions are building, the move to lower transit volumes comes after a Russian bank — which is 41%-owned by Gazprom — indicated it will provide a $2 billion loan to allow the Ukrainian gas-transit company to buy gas from Russia.

“I’m not sure if it is a case of carrot and stick,” said Timothy Ash, an analyst at Royal Bank of Scotland Group PLC in London.

Russia is also putting additional pressure on Ukraine by speeding up construction of the South Stream pipeline to carry Russian gas under the Black Sea to Europe.

However, as strains build, Moscow’s could yet pull a rabbit out of its hat. ”A gas-price discount is still Russia’s main bargaining chip, as it looks to secure control of the pipelines,” Mr. Ash said.

Kiev is trying desperately to secure cheaper gas from Moscow. The Ukrainian government refuses to increase gas prices for domestic consumers ahead of parliamentary elections in October, and it is keeping the state gas company afloat with repeated injections of capital from the state budget.

Ukrainian President Viktor Yanukovych said recently that he hopes to reach a new gas deal with Russia in May.

Such a deal “would probably be part of an agreement that would give Gazprom a stake in or control over Ukraine’s gas transmission system,” said Andrew Neff, an analyst at IHS Global Insight.

Comments (5 of 15)

This HTC phone doesn't have a mode for taking close up ptruices! MotoRokr did! Anyways, on that globe I guess you should be able to identify Russia The spider is on the western border (end) of Russia. But it looks like another country! Destination Infinity

11:14 pm July 23, 2012

IbudmargaPristyanandi wrote:

This plays very closely into my rkmares a day or so back regarding relations with Russia and our ability to continue undisturbed with our operations in the Middle East. However any mention of Bush's cabinet having deep and abiding interest in Ukraine's security makes me nervous. We had a deep and abiding interest in Iraq, and we're entrenched in a war that has divided this country worse than any single time since Vietnam (though admittedly Iraq has aa0 higher success rate). Bush and his group have handled Russia miserably in the last 8 years. What possible reason should we expect them to handle them better now? Where the hell was Conde when we were alienating the crap out of them 7 years ago? I hope this Cheney visit doesn't make a bad situation worse. I don't like having the Bush Administration's fingerprints anywhere near Russia before McCain's/Obama's group can begin the real and lasting work over there.

7:17 pm April 6, 2012

Oceanian wrote:

The latest news report is that Russia's third pipeline ( after North and Southstream) will be known as the MOON-stream. It will follow a trajectory all the way to the main gas reserves under the moon craters now claimed as Russian territory. All that because Russia soon will be running out of Siberian gas and NO respectable oil and gas major is willing to risk its corporate future in the Russian Arctic.

5:58 pm April 3, 2012

Johnnie wrote:

Point is idiotic geopolitics force governments to
heavily subsidize wind and solar (Germany).

Post WW2 energy supply configuration is charming very quickly.
Russians should want to preserve it otherwise their market share
will continue to drop.

that's the point Gary Ru.

5:42 am April 3, 2012

Gary Ru to Johhnie wrote:

Alternative energey is bs while it more expensive.
Poland is not #1 in Russian gas consumers. It ranks #6 after Ukraine, Germany, Turkey, Belarus, Italy. The article is not about Poland. Russian gas market is all Europe. Who's care about Polish market.

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